Make-Buy, Outsourcing & Network Design worked example

Insourcing Payback with equipment and setup investment to bring work in-house of 12,500 $: a worked example

Here is what the math looks like when conditions slip. We hold every other input steady and drop equipment and setup investment to bring work in-house to 12,500 $, then walk the calculation through step by step. Estimate insourcing payback for make-buy, outsourcing and network design using production-ready inputs so teams can screen a capital project before a detailed business case.

The inputs for this scenario

  • Equipment and setup investment to bring work in-house: 12,500 $ (the input this scenario stresses; the baseline uses 25,000)
  • Annual savings vs. current outsourced spend: 18,000 $ / yr (held at the documented default)
  • Annual added in-house support and labor cost: 2,500 $ / yr (held at the documented default)

Working through the calculation

  • The calculation starts from the formula this tool documents: Net annual insourcing payback savings = annual insourcing payback savings - annual insourcing payback support cost.
  • Insourcing payback payback period works out to 0.81 yr at these inputs, and this is the headline figure for the scenario.
  • Net annual insourcing payback savings works out to 15,500 $ / yr at these inputs.
  • Insourcing payback investment works out to 12,500 $ at these inputs.
  • Five-year net insourcing payback value works out to 65,000 $ at these inputs.

How this compares with the baseline

  • Against the tool's baseline example, where equipment and setup investment to bring work in-house sits at 25,000 $ and the headline result is 1.61 yr, this scenario comes in 50% below the baseline at 0.81 yr.
  • The practical read: the gap between this scenario and the baseline is entirely attributable to equipment and setup investment to bring work in-house, so recovering it is worth quantifying in dollars before considering equipment or staffing changes. It assumes savings and support costs stay flat every year and ignores the time value of money, ramp-up scrap, and demand changes — use NPV or IRR for capital decisions above a few hundred thousand dollars.

Results at a glance

  • Insourcing payback payback period: 0.81 yr (headline result)
  • Net annual insourcing payback savings: 15,500 $ / yr
  • Insourcing payback investment: 12,500 $
  • Five-year net insourcing payback value: 65,000 $

Run it with your numbers

  • To rerun this with your own numbers, open the live Insourcing Payback calculator, set equipment and setup investment to bring work in-house to your actual value, and adjust the remaining inputs to match your operation.

Last reviewed 2026-05-12.